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Pyramid scheme fraud

It is a scheme where a fake organisation enrols innocent people into a business that offers them worthless products or investment plans. It happens at multiple levels where a recruit is asked to bring in others to join the plan to earn money. 

One has to pay a fee to get into such schemes, and then you create a chain of people by asking others in friends or family to join. If you get recruits, you are paid out of the receipts. 

Such schemes require recruits to keep the chain going. Every new person brings in the joining fee and some basic deposits used to pay the former members. 

The money offered by recruits is not invested in products or the production of any item. All the funds collected through the people who join the chain is passed up the chain. Such plans are unauthorised and worthless, and if you lose money, there is no chance to get it back. 

Those who start the scheme are on the top of the pyramid and get the highest portion of the earnings, and in the end, all the recruits lose their capital.

Such trades are illegal because it is not based on actual production and sale. Instead, the fraudsters use pressure tactics or bogus claims to get rushed decisions from the investors, and they give no time to consider the nature of business. 

Instead, they offer attractive brochures and documents with graphs showing long term huge gains in future, which attract new investors into their plans. 

Although their offers appear legitimate, they use technical terms and offer lucrative job titles to the trainees, who are asked to pay to join and learn tricks of the business; those seeking supplementary earnings through small investments register to their websites as it appears professional and credible. 

People contacted for any such offers should check the firm's authenticity, investigate its status on authorised websites, and check the contact details and work histories to find out more about them. In addition, they should seek expert advice and conduct independent research on their business profile to ensure the offers. 

How To Know If You Are a Victim?

  • If you are approached by someone offering multiple level investment plans that claim to deliver huge profits in a short period and has no associated risk.

  • If you are asked to pay a fee to join the firm.

  • You are pressured to contact others who can join the scheme, and you are told you can earn from each new member you bring.

  • If you suspect you have been defrauded, report it to the authorities.

  • If you are an active member of such a scheme, try to break off contact and not invest more into their plans.

How To Protect Yourself?

  • If you consider investing in any such scheme, try to find out all the information and conduct complete research on it. Do not be lured by attractive profit rates or colourful brochures.

  • Often people who join such schemes are asked to sell products with no resale value. One should inspect the items carefully before buying or selling worthless items to close friends or family. 

  • If you have already provided all your bank details and other information, alert your bank.

  • Always keep multiple copies of all the documents you receive from such firms as they can be used as evidence to report to authorities.

  • Such groups often share the personal details of people they have already targeted. Hence, if you have joined such schemes, you may be approached by similar platforms, where they use different identities but could be the initial operators' partners.

  • Those who have fallen for such schemes may be contacted by them impersonating law enforcement or lawyers, who advise paying some upfront fee to get the lost money back.

  • Raise concerns if you suspect fraud and have lost money in such schemes.

Date Published: Feb 18, 2022

Types of fraud

A-Z of fraud

To help understand which fraud you've been affected by, we've categorised them into an alphabetical list.

What is fraud and cyber crime?

Cybercrimes can be of two types. First, it can be cyber dependent, where the fraudsters use online devices to convince the victim to accept their offers.

Advance fee fraud

If you are trying to get a loan for a house or a car, they ask to meet the provider to get the financing arrangement and pay the finder's fee in advance.

Corporate fraud

Corporate frauds can be complicated, committed either by the firm or an individual. Nevertheless, it mostly involves cheating where the employee or the firm.

Individual fraud

There are many types of individual frauds related to advance fees, investments, insurance brokers, bogus tradespeople, Ponzi schemes, pension liberation.

Online fraud

Hence the number of cases of online fraud is increasing each year, and most such cases include – account takeover, direct frauds, or scams related domain names.

Identity fraud and identity theft

The criminal uses the stolen identity of another person living or deceased to conduct unlawful activities like obtaining goods or services in another's name.
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